Yahoo Finance Save Mart Center debt spiking over next two years. Will Fresno State students pay for it?
Reality Check is a Fresno Bee series holding those in power to account and shining a light on their decisions. Have a tip? Email tips@fresnobee.com.
Fresno State was chasing a dream in building the Save Mart Center, ignoring warning signs along the way with its financing plan and a troubled basketball program led by coach Jerry Tarkanian that was supposed to fill seats in the venue night after winter night.
Now, two decades later, and after making more than $20 million in interest-only payments while pushing principal payments into the future, the university still owes more than $42 million on an arena that cost a reported $103 million to build.
Worse, this year and in 2025, the university must make substantial payments toward its capital lease obligations that could indirectly impact students already facing higher tuition costs across the California State University system.
Those two payments total more than $16 million in principal and interest, with $6.2 million due this year and $10.3 million in 2025, according to the most recent financial documents from the California State University Fresno Association, the nonprofit auxiliary organization that oversees the Save Mart Center.
The amount due next year is more than double what was owed in most previous years and more than double what is owed in most subsequent years.
After that, the Association still will owe more than $26 million on a multi-purpose sports and entertainment arena that is showing its age and lacks the fan amenities of many modern arenas.
The full debt won’t be retired until Nov. 1, 2031.
“It’s not a philosophical issue at this point. It’s not an issue of opinion. It’s a fact,” said president Saúl Jiménez-Sandoval, who inherited what has been a financial ticking time bomb since the university broke ground at Shaw and Chestnut avenues in 2001.
Impacted by debt
There’s no question the higher debt service will continue to impact a Fresno State athletics department that receives no cut of revenue from Save Mart Center arena suite leases, signage, parking or concessions sales, and has to pay for everything from floor changeovers to staffing, security, utilities and liability insurance for every fan who walks through the gates on game days.
The higher debt payments could make it more difficult for the university to update the aging arena, or take on more debt to renovate a decaying Valley Children’s Stadium, where the Bulldogs play football.
Meeting the short-term debt obligation also could indirectly hit some of the more economically disadvantaged Fresno State students in the pocketbook.
The California State University Fresno Association oversees the campus bookstores, student unions, student recreation center, student housing and university dining services, as well as the Save Mart Center.
Any net surplus generated by those operations at the end of a fiscal year are directed by board policy to reserve accounts that are used to fund long-term capital lease obligations, as well as things like facility improvements and deferred maintenance.
Several of those operations are projecting a significant increase in net income as principal and interest payments on the Save Mart Center increase, according to budget summaries.
The university dining hall, as an example, had net income of $398,695 in 2022-’23. In 2023-’24, dorm food is expected to generate $1.3 million.
It would not be the first time the dining hall produced net income in seven figures. In 2021-’22 it had net income of $1.6 million, one year after taking a loss of more than $700,000 during the COVID-19 pandemic.
Campus officials including vice president of administration Debbie Adishian-Astone, who as project coordinator was deeply involved in the Save Mart Center development and management, declined requests from The Bee for sit-down interviews to discuss arena financing and how future payments will be covered.
But Adishian-Astone, who also is chair of the California State University Fresno Association, acknowledged in a 2023 story in The Bee that the auxiliary organization covers debt service on the Save Mart Center as well as operating losses.
“Overall, with debt service and operating deficit, our auxiliary has to cover between $2 million and $3 million a year and athletics doesn’t have the capability to do that,” she said, responding to a question about ways to better financially support the Bulldogs’ athletics programs. “I know everyone looks at the revenues, but they never look at the expenses. We try where we can. It’s not that we don’t want to, but we have a fiscal responsibility to the operating deficit and the debt service.”
It has been that way since 2005.
The original arena financing plan, which was approved by the California State University board of trustees, assumed operation of the arena was expected and projected to lose around $1 million a year. But, on a cash flow basis, arena revenue streams were supposed to cover the operating deficit and the bond/capital lease obligation payments.
When the original 2002 series bonds for the project were refinanced into the CSU’s system-wide revenue bond program, the capital lease obligation became a general obligation of the Association and not based strictly on Save Mart Center revenue.
State money cannot be used to pay debt
Student housing in 2023-’24 is projected to record net income of $1.3 million. But that, too, is an area that has generated significant net income for the Association.
It had net income of more than $2.6 million in 2021-’22, when dorm space was at capacity amid a housing crisis where Fresno had the second-highest rent increases in the country. The budgeted projection that year was just $814,577.
The Association posted a net income deficit in seven consecutive years from 2014-’15 to 2020-’21 and eight times in 10 years going back to 2011-’12.
But in 2021-’22 it generated net income of $833,741.
In 2022-’23, its net income increased to $6.6 million.
In its 2023-’24 budget, net income was projected at $4.7 million and likely will be higher.
State money cannot be used in repaying the Save Mart Center debt.
In the California State University system, auxiliaries are legally separate entities and the system may not simply transfer funds to help one financially. But there is an exception under state law governing the CSU’s ability to issue debt that allows for the movement of funds between the system and its auxiliaries that have borrowed under the CSU’s debt program to help with the payment of debt service.
Fresno State would qualify, but the university has not requested assistance with the debt, according to a CSU spokesperson.
The nonprofit Fresno State Foundation could be a source of funding along with ground lease revenue from Campus Pointe, the public/private mixed-use development across Chestnut Avenue from the Save Mart Center that includes a movie theater, shops and restaurants. The Bulldog Foundation, the fundraising arm of the athletics department, agreed at the university’s request when the arena was being built to set aside part of the proceeds from its annual fund drive for debt service if needed.
“What is at the core of all of this is Fresno State, back in the early 2000s, signed an agreement and that agreement stated that the developer was going to build the Save Mart Center and then we were going to be responsible for paying it back,” Jiménez-Sandoval said. “That’s what we’re doing.”
